1. Technical Field
The invention relates to Mutual Funds portfolio management. More particularly, the invention relates to pre-trade compliance checking in a Mutual Funds portfolio management system.
2. Description of the Prior Art
Trading in the heavily regulated mutual fund industry involves much more than buying and selling securities. Rules and regulations from many different organizations govern the mutual funds industry. Traders must comply with a seemingly infinite list of portfolio diversification rules, including all of the mandates in the Investment Company Act of 1940 (a relevant portion of which is also referred to herein a Rule 2a-7, any other pertinent State and Federal regulations, client restrictions, and an investments firm's in-house rules.
Failure to adhere to the rules and regulations can have large negative consequences for a fund with respect to fines, disadvantageous tax consequences, bad publicity, and, ultimately, funds under management. Thus, the ability to determine a funds position quickly in relation to the large variety of compliance rules and regulations before a trade is executed is extremely valuable.
One proposed compliance system (see J. Michaels, Compliance Under Control. (Compalert Securities Trading Regulations Compliance System for the Merrin Financial Trading System), Wall Street & Technology, vol. 9, no. 9, pp. 17-20 (May 1992)) attempts to determine compliance at the time a trade is executed. Thus, a trader must first enter a trade and then attempt to execute the trade before he knows whether the trade is in compliance and therefore acceptable. This arrangement is inefficient.
It would be advantageous to provide a mechanism for pre-trade compliance checking in a portfolio management system in which a trader can determine what actions are available with regard to compliance before any trades are entered into the portfolio management system.